Russian metal producers will ease prices to stay in Vladimir Putin's good books

Vladimir Putin has lashed out at metal producers. Russia's premier accused
them of unfair pricing.

By Jason Bush

5:52PM BST 25 May 2010

There is an anti-monopoly probe of Evraz, a leading steelmaker. But the crackdown probably says more about the strong lobbying power of buyers than about anti-competitive behaviour.

Putin isn't waiting for the results of any investigation. He described planned hikes in metals prices as "incomprehensible". On cue, Russia's anti-monopoly watchdog announced an investigation into Evraz. The company's share price promptly tumbled 5pc, and other Russian steelmakers were also hit.

The tale sounds familiar. Two years ago, when Putin accused coal-and-steel producer Mechel of price-fixing, he managed to wipe 40pc off its stock price in one day, depressing the whole Russian market. Investors have learned that a sharp rebuke from Putin doesn't necessarily spell doom, but the latest example is still bad news for steelmakers.

In fact, domestic steel seems to be a relative bargain. Prices are rising along with the global market, but Troika Dialog says hot rolled coil, a benchmark steel grade, still costs about 25 pc less in Russia than Europe.

But Putin is probably less interested in such factors than he is in the difficult situation facing major steel customers such as car manufacturers. They are now squealing to the government over plans for 10pc-30pc further hikes.

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Price disagreements have led another steelmaker, Severstal, to suspend supplies to Avtovaz, Russia's largest car manufacturer.

What's troubling about these incidents is the implication that Putin's personal interventions drive Russian anti-monopoly regulation, like much else in the country. Putin seems to consider competition probes as a form of industrial policy. He expects metals barons, who are doing well, to chip in to help their less fortunate comrades. They will surely get the message, moderating price increases in order to stay in Putin's good books.

In Russia, the wishes of its powerful premier often matter more than mere economics.